Kennedy-Taylor Pty Ltd v Civil and Civic Pty Ltd

[1998] QCA 3

IN THE COURT OF APPEAL	[1998] QCA 003
SUPREME COURT OF QUEENSLAND

Appeal No. 8733 of 1996

Brisbane

[Kennedy-Taylor (Q) P/L v Civil & Civic P/L]

BETWEEN:

KENNEDY-TAYLOR (QLD) PTY LTD

(ACN 009 672 468)

(Claimant) Appellant

AND:

CIVIL & CIVIC PTY LIMITED

(ACN 000 098 162)

(Respondent)	Respondent
Macrossan CJ Williams J Byrne J

Judgment delivered 3 February 1998

Separate reasons for judgment of each member of the Court; Macrossan CJ and Williams J concurring as to the orders made, Byrne J dissenting in part.

APPEAL ALLOWED FOR THE LIMITED PURPOSE OF AMENDING THE ORDER MADE BELOW BY OMITTING PARAGRAPH (iii) AND DECLARING THAT THE AWARD WILL TAKE EFFECT WITHOUT THE ARBITRATOR'S FINDINGS AND ORDER ON THE MATTER OF ESTOPPEL. APPELLANT TO PAY RESPONDENT'S COSTS OF THE APPEAL.

CATCHWORDS:	Arbitrator's interim award inconsistent with his reasons therefor - final award “confirmed” the interim award but the reasons adhered to the earlier ones - trial judge ordered that final award be varied - whether amendments go beyond matters of form and affect the merits of the controversy - whether reasons for interim award intended to be included in the final award - whether arbitrator's reasons inadequate - whether arbitrator unsuitable.
Counsel:	Mr H. Fraser Q.C. for the appellant Mr W. Sofronoff Q.C., with him Mr S. Lumb for the respondent
Solicitors:	Clayton Utz for the appellant Freehill, Hollingdale & Page for the respondent
Hearing date:	30 July 1997

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 8733 of 1996

Brisbane

Before Macrossan CJ
Williams J
Byrne J

[Kennedy-Taylor (Q) P/L v. Civil & Civic P/L]

BETWEEN:

KENNEDY-TAYLOR (QLD) PTY LTD

(ACN 009 672 468)

(Claimant) Appellant

AND:

CIVIL & CIVIC PTY LIMITED

(ACN 000 098 162)

(Respondent) Respondent

REASONS FOR JUDGMENT - THE CHIEF JUSTICE

Judgment delivered 3 February 1998

This appeal is the latest episode in what has become a long series of proceedings and court

challenges involving an arbitration conducted by Mr Eric Brier, an engineer.

The appeal comes from the decision of Derrington J pronounced on 20 September 1996 largely

dismissing a challenge made to the arbitrator’s award of 18 March 1996 but ordering that it should have

effect subject to certain amendments. The judge ordered in these terms:

“That the award of the arbitrator be amended as follows:

(i)          By setting aside his confirmation of subparagraph (b) of paragraph 3 (which has the heading, ‘Accord and Satisfaction’) and substituting in lieu thereof the following:

(b) That it was an express term of the said agreement that the Respondent would pay and the claimant would accept the sum of $94,705 less credits of $25,784 being a final payment of $68,921 together with such amounts as might be approved in respect of variation numbers 35, 36 and 43 and that the Respondent would provide to the claimant details of back charges describing the breakdown of certain back charges totalling $15,707.23 in full and final settlement of all claims and entitlements of the claimant under the subcontract, or arising out of or in relation to the subcontract works.

(ii)	By inserting the word ‘part’ in subparagraph (c) of the said paragraph 3 between the words ‘In’ and ‘performance’.
(iii)	By deleting the whole of paragraph 4 (which has the heading “Estoppel”) and substituting the following:
4. Estoppel
Because of the foregoing it is not necessary to decide this issue.

And That otherwise the Application be dismissed.

And That the Applicant pay to the Respondent the costs of and incidental to the application, including reserved costs, if any, to be taxed.”

The order was made on a notice of motion filed on 28 March 1996 challenging the award

referred to. The history of the matter shows that a number of grounds and points of objection had

been raised by the appellant contesting determinations and rulings made by the arbitrator but at each

point without success. The issues now to be considered have become more confined although they too

were the subject of earlier attention. Because of the limited extent of the matters now in dispute and

also because there is an issue to be decided concerning the extent to which Derrington J and now this

Court should be regarded as free to refer to details of evidence canvassed and earlier rulings made, only

a relatively brief outline will be given at this point to provide a setting for the matters later discussed.

This outline is taken from the record of court proceedings and the terms of the arbitrator’s award of

18 March 1996.

The respondent was the contractor and the appellant a sub-contractor engaged in the
performance of a certain construction project that included electrical installation work. Disputes arose

about payments and entitlements and the appellant served a notice of dispute on the respondent on 4

July 1990. This led to the appointment of Mr Brier as arbitrator. Mr Brier was appointed even though,

as it turned out, the main issues that called for decision were legal ones. The present appeal is to be

decided with due regard to provisions of the Arbitration Act 1973 which continues to apply to this

matter, notwithstanding the enactment of the Commercial Arbitration Act 1990 (see s.3 of the latter

Act).

Prior to service of the notice of dispute there had been negotiations upon a number of matters

leading to what the respondent contends was a concluded agreement of compromise of all claims

reached between the parties although the appellant soon after the date of the agreement made clear an

opposing point of view that it has subsequently maintained, namely that no agreement of compromise

had been reached. This fundamental issue, underlying all later proceedings, has been determined by

the arbitrator in the respondent’s favour.

The respondent acted upon the agreement of compromise that it regarded as having been

reached by making a payment to the appellant of $68,921 which the appellant accepted and retained

asserting that it was taking it as a progress payment against a larger entitlement that it proceeded to

claim was due to it. The respondent concedes that two ancillary matters were agreed upon in addition

to payment of the sum referred to and it accepts that it has not fully completed the steps involved in

those two aspects because, as it says, it was confronted by the appellant’s unwillingness to accept and

act upon the basis that a final agreement of compromise had been reached and largely performed by

its payment of the sum of $68,921.

After the arbitrator’s appointment was confirmed there was debate upon an appropriate
procedure to adopt, the arbitrator eventually indicating to the parties that he proposed to make what

he described as an “interim” award. Lengthy hearings followed, the parties being represented before

the arbitrator by lay advocates. The arbitrator handed down his interim award in December 1991. The

appellant then gave notice of motion seeking to set aside the interim award and for other relief. This

motion was made returnable before the Court of Appeal. The Court remitted that matter for hearing

to the Trial Division where it was heard before Kiefel J who, on 23 December 1993, dismissed the

appellant’s motion to set aside the interim award. An appeal was then brought from that decision to the

Court of Appeal which on 2 November 1994 dismissed the appeal and remitted the matter to the

arbitrator for reconsideration directing him to make a final award.

The arbitrator’s final award was the award made on 18 March 1996 and now subject to

challenge. It followed discussion between the parties which resulted in their accepting that certain earlier

issues should no longer be treated as outstanding, it being sufficient for the arbitrator to deal only with

two of the points that had been earlier debated. Those two points were whether a final binding

agreement of compromise had been arrived at as the respondent contended and, associated with that,

whether the appellant was estopped from contending to the contrary.

The arbitrator’s final award determined the fundamental issue between the parties in favour of

the respondent, a ruling which, in view of indications earlier given, it might be thought could hardly have

surprised the appellant. However, with unflagging determination the appellant sought once again to set

aside the latest obstacle in its path now represented by the final award of 18 March 1996 and to

remove the arbitrator from further involvement. This application was refused by Derrington J and the

present appeal from that decision now has to be dealt with.

It is contended by the appellant in its submissions on the appeal that the judge below made
erroneous findings of fact and law. It is said that the Judge should have found that the way in which the

arbitrator proceeded involved a denial of natural justice because, as it was said, the arbitrator had failed

to deal adequately with submissions made to him and had failed sufficiently to state his reasons; that the

Judge should have found an error of law on the face of the award because of an inconsistency between

it and part of the interim award said to have been incorporated in the award and, finally, should have

found errors of law on the face of the award as a result of the arbitrator’s treatment of repudiation, an

issue said to be tied in with the continuing validity of any final agreement arrived at between the parties,

and as a result of the arbitrator’s treatment of estoppel.

Some particular attention should now be devoted to the central issues concerned with

compromise and estoppel. It has to be said that to an extent, the appellant’s complaints involve an

attempt to persist with arguments that have already been determined against it and they probably stem

from discontents with the advance indications that the arbitrator, whether wisely or not, gave about the

way he was disposed to decide the questions presented to him. It appears that there is an attempt to

make capital out of the rather non-lawyerly way in which the arbitrator has expressed his decision.

There is also the fact that his final award contained what the judge below has regarded as a formal but

non-fatal deficiency.

There is no reason to conclude that the appellant has been denied natural justice. It has already

had the benefit of a number of reviews by the Court and whether or not the arbitrator has fallen into

error in his final award he has approached his task of decision conformably with the previous orders of

this Court. Whether anything is left for the appellant to complain of in the award itself will require a

decision upon the material that can be considered in deciding whether there is error on the face of the

award. In assessing the appellant’s complaints of defects on the face of the award it is necessary to remember that the arbitrator is not legally qualified and critical standards that might otherwise apply may

not be fully applicable: cf. Andrews v. Mitchell (1905) A.C. 78 at 80.

Error on the face of an award will be demonstrated if within the award or a document actually

incorporated in it there appears some legal proposition which is the basis of the award and which is

erroneous, that is, if it appears that an arbitrator has tied himself to a legal proposition which is unsound:

Champsey Bhara & Co. v. Jivraj Balloo Spinning and Weaving Co. Ltd. (1923) A.C. 480 at 487-488.

Misconduct is the usual term to describe actions of an arbitrator which can lead to effective challenge

being made to his award but the term is used in a technical sense and not in a sense of morally

reprehensible. To sustain it there will, in the present case, have to appear some error on the face of the

record: re Scibilia and Lejo [1985] 1 Qd.R 94 at 98.

In judging error, extrinsic material cannot be looked at: University of New South Wales v.

Cooper (1981) 35 A.L.R. 219 at 226 and Champsey Bhara (supra). However, if some otherwise

extrinsic material is clearly incorporated within the award the question is judged by looking at it as well

as the terms of the award itself to determine what the intention of the arbitrator was: see Gold Coast

City Council v. Canterbury Pipelines (Aust) Pty Ltd (1968) 118 C.L.R. 58 esp at 63-64 and 76-77

and Tuta Products Pty Ltd v. Hutcherson Bros Pty Ltd (1972) 127 C.L.R. 253 at 258.

The appellant’s attack on the award in this case has involved an appeal to a wider range of

matters than can be regarded as acceptable. How much beyond the terms of the final award should this

Court go?

It is necessary to look first at the final award to see if it appears with sufficient clarity what the

arbitrator has decided combining this with a decision on what, if anything, in addition may have been

incorporated in it. In this assessment it is necessary to keep in mind that in the expression of his finding
the arbitrator was an engineer and not a lawyer.

The final award in terms does make clear what were the two issues which at that stage the

arbitrator was called upon to resolve. They were described in the award as the issues of accord and

satisfaction and estoppel.

The first question for the arbitrator’s decision in considering accord and satisfaction was

whether there had been a final agreement reached in respect of all outstanding claims. Resolution of this

question depended upon the arbitrator’s assessment of evidence and particularly that of Mr Eacersall,

acting on behalf of the respondent, and Mr Lawson, acting on behalf of the appellant. When the terms

of his award are examined it is quite clear that the arbitrator accepted the evidence of Mr Eacersall that

there had been a comprehensive agreement of compromise reached. This involved rejection of the

contrary point of view urged for the appellant. The arbitrator found that a change of attitude on the

appellant’s part occurred when following the final agreement an attempt was made by Mr Holley, the

appellant’s state manager, to override the decision made by Mr Lawson accepting the agreement in

settlement of all claims. The arbitrator was entitled to come to the conclusion that he did on this issue

and he has sufficiently clearly expressed it.

When the terms of his award are considered it is seen that he also makes it clear that his

decision was that there were three terms included in the final agreement. They were the payment of

$68,921 to be made to the appellant, the approval of the principal to be obtained to a possible

additional payment of $4,861 and the provision by the respondent of details of certain other charges

totalling $15,707.23. It might now be said that the last two were collateral and of minor importance and

it is probable that they had not been regarded as major issues for debate.

There is nothing unclear in the award affecting the finding that a final agreement as such was
reached. Any potential lack of clarity in the final award stems only from the arbitrator’s statement later

in the document that he was, on the compromise issue confirming his interim award. This statement

justifies and requires our making reference to his interim award to see what he had found on this issue.

We see that in his interim award he found that there was one term in the compromise agreement,

namely an agreement by the respondent to pay the sum of $68,921 and he did not find the two

additional matters. The reasons accompanying the interim award exhibit some tendency to make a

different finding but I do not consider that the terms of the final award purport to incorporate those

reasons. One question is whether the arbitrator was meaning by his words in the final award to say

more than that he was confirming his decision that some final agreement of compromise had been

reached. However, read as a whole, it should not be accepted that in his final award he was intending

to depart from his conclusion clearly enough expressed that there were the two additional headings in

the agreement of compromise.

A further question might be whether the arbitrator was deciding that it was agreed that there

was a discharge of all claims in exchange for the respondent’s promise in respect of the three matters

or whether the discharge was to occur only in exchange for the respondent’s performance under those

three heads. This is not in the present case a matter damaging to the effect of the compromise

agreement found in the respondent’s favour. The important ingredient, the money sum of $68,921, has

been paid and the principal’s approval to make payment of further small sums involved under the

second of the three headings has been obtained. No difficulty is raised in the way of providing the

breakdown of the further items referred to under the third heading. The arbitrator has found that the

respondent remains willing to attend to the full ambit of its assumed obligations but has suspended its

further performance because of the refusal of the appellant to adhere to the bargain in such a way as to amount to a repudiation. In discussing this issue the arbitrator may be thought to use the word

“repudiation” not fully consistently. For example at one point in his award he raises for consideration

a question, asking which side first repudiated the agreement. However, he has not found other than that

the respondent continues to rely on the compromise found by him to have been reached, that is he has

not found that the respondent relied on the appellant’s indication of a refusal to adhere to the agreement

as causing the respondent for its part to reject the agreement as binding it to further performance. In

short, the arbitrator has found that the respondent remains liable to perform and has not refused to

perform.

When the terms of the final award and the reference to the confirmation of the interim award

on the accord and satisfaction point are taken together, the conclusion should be reached that the

arbitrator has with sufficient clarity decided that compliance with all three headings specified in the

agreement would supply the performance that on the respondent’s part was necessary to finally

discharge all claims under the contract. Therefore some formal correction of the award should be made

and the modification suggested by the judge below in paragraphs (i) and (ii) of his order should be

accepted if there is no obstacle in the way of adopting that course.

I consider that the Court is justified in using s.31 (c) of the Act to amend the award in a formal

way to make it conform with the arbitrator’s findings and clear intent. The respondent seeks to maintain

the order in its favour made below. For our purposes, this should be regarded as equivalent to

“application”. The award should be regarded as “imperfect in matter of form not affecting the merits

of the controversy”. Those words should not be narrowly construed. We were left with the impression

that if a final agreement of compromise was regarded as having been reached between the parties there was no dispute that it was one that in fact contained all three headings specifying the performance to

be undertaken by the respondent. An alternative course would be for this Court to send the award

back to the arbitrator requiring him to alter it to conform in its formal parts with his clear findings. In the

circumstances, that should be regarded as an unnecessary formality that would simply result in avoidable

costs being incurred.

On the estoppel point, the arbitrator’s decision that there has been a relevant estoppel cannot

be regarded as legally correct but that does not affect the validity of the award. There is no room in fact

for a relevant estoppel to apply when the arbitrator has found that a full final agreement was reached

between the parties and that it remains on foot. It adds nothing to say that the appellant is estopped

from contending to the contrary.

All basic findings on which the formal parts of the award depend are clear and there are no

reasons in terms of natural justice, competence of the arbitrator or otherwise which would call for the

award to be set aside.

Although orders (i) and (ii) made below should be allowed to stand the remainder of the order

should be amended by omitting (iii). In effect these reasons should declare that estoppel has no

operation and that the award will take effect without the arbitrator’s finding in respect of it: cf. Gold

Coast City Council v. Canterbury Pipelines (Aust) Pty Ltd (supra) at 68 per Kitto J. I do not, however,

consider that we are justified in going beyond this declaration and ordering its omission from the award

including a substituted positive ruling which the arbitrator did not intend to make. That would be to

tamper too much with the author’s work while maintaining its ascription to him.

The appeal should be allowed for the limited purpose of amending the order made below by

omitting paragraph (iii) and declaring that the award will take effect without the arbitrator’s findings and
order on the matter of estoppel. The respondent should have its costs of the appeal.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 8733 of 1996

Brisbane

Before Macrossan CJ
Williams J
Byrne J

[Kennedy-Taylor (Q) P/L v Civil & Civic P/L]

BETWEEN:

KENNEDY-TAYLOR (QLD) PTY LTD

(ACN 009 672 468)

(Claimant) Appellant

AND:

CIVIL & CIVIC PTY LTD

(ACN 000 098 162)

(Respondent) Respondent

REASONS FOR JUDGMENT - WILLIAMS J.

Judgment delivered 3 February 1998

I have had the advantage of reading the judgments of the Chief Justice and Byrne J. All relevant

facts are set out in those judgments and there is no need for me to repeat any of them. In my opinion

the orders proposed by the learned Chief Justice should be made, and I agree generally with his reasons

in so concluding. I will, however, express some brief views of my own.

The critical issues raised in the arbitration - largely conducted by non-lawyers before an

engineer Arbitrator - were, firstly, whether a binding compromise was reached on 1 May 1990, and,

secondly, if there was, whether in the events which occurred that agreement was no longer binding on

the appellant sub-contractor.

The Arbitrator clearly concluded that a binding compromise was reached, the terms of which

are clearly set out in his reasons. That conclusion was based primarily on his findings as to credibility,

and I can discern no manifest error of law in relation to that part of the Award.

From a lawyer’s perspective the second issue before the Arbitrator incidentally raised questions

of conduct amounting to a repudiation of a contract, questions as to whether or not the innocent party

accepted that repudiation and rescinded the contract, questions as to whether the contract

(compromise) remained on foot, and questions as to whether relevant conduct by either party gave rise

to an estoppel which might affect the answer to any of the foregoing questions. Given the difficulty

which many lawyers have in dealing with such topics it is not surprising that the arbitrator here did not

always use consistent terminology, and often chose to use non-legal expressions in stating his

conclusions.

However, in my view, he approached the critical issues in a practical and commonsense way,

and made findings which clearly indicate the legal consequences thereof. There is a definite finding that

the respondent substantially complied with its obligations under the compromise by paying the sum of

$68,921 on 11 May 1990. There is also a clear finding that by Holley’s letter of 11 May 1990 the

appellant stated that it did not consider itself bound by terms of the compromise. The findings of the

Arbitrator also make it clear that as and from 11 May 1990 the appellant has asserted that there never was any binding compromise. If not expressly, at least inferentially, the Arbitrator concluded that such

conduct by the appellant constituted repudiation of the agreement.

It is clear on the findings, and on the whole of the material before the Arbitrator, that the

respondent has not since 11 May 1990 taken steps to comply with the ancillary obligations imposed

upon it by the compromise of 1 May 1990. The Arbitrator’s findings with respect to that are

summarised by the learned Chief Justice in his reasons as follows:

“The Arbitrator has found that the respondent remains willing to attend to the full ambit

of its assumed obligations but has suspended its further performance because of the

refusal of the appellant to adhere the bargain in such a way as to amount to a

repudiation.”

That, in my view, is a fair summary of the approach adopted by the Arbitrator as evidenced by

his reasoning on pages 4 to 6 of his Award and Reasons. That was also the interpretation placed by

the learned primary judge on those passages.

Put in that way the finding of the Arbitrator is that the respondent has suspended performance

of the further obligations rather than refused to perform them. A consequence of that is that the

conduct of the respondent in not performing its ancillary obligations could not amount in law to a

repudiation of the compromise giving the appellant a right to elect to rescind. Such a finding also implies

that the respondent has not elected to rescind because of the appellant’s repudiation. As there was no

repudiation by the respondent the appellant’s conduct in purporting to rescind on 17 September 1991

on the ground of the respondent’s repudiation is of no legal effect.

It is unfortunate that in his reasons the Arbitrator approached the problem by asking, “what party first repudiated the agreement”. I agree with Byrne J that it is usually a mistake to attempt to resolve an issue such as this by simply asking who repudiated first. But, ultimately, the Arbitrator has

not made an error of law here because on his findings there was no repudiation by the respondent. The

respondent merely suspended further performance of its obligations until such time as the appellant

recognized the existence of the binding compromise.

The agreement of 1 May 1990 is still on foot. It has been repudiated by the appellant, but the

respondent has not elected to rescind because of that. The respondent is still obliged to perform the

ancillary obligations imposed on it by the agreement, and failure to perform those obligations could result

in a claim for damages for breach of contract. Any such claim made by the appellant could be offset

by a claim for damages for repudiation made by the respondent.

As stated before, I agree with the orders proposed by the learned Chief Justice.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 8733 of 1996

Brisbane

Before Macrossan CJ

Williams J

Byrne J

[Kennedy-Taylor (Q) P/L v Civil & Civic P/L]

BETWEEN:

KENNEDY-TAYLOR (QLD) PTY LTD

(ACN 009 672 468)

(Claimant) Appellant

AND:

CIVIL & CIVIC PTY LIMITED

(ACN 000 098 162)

(Respondent) Respondent

REASONS FOR JUDGMENT - BYRNE J

Judgment delivered 3 February 1998

In 1990 Mr Brier was nominated to act as the arbitrator in a dispute between the appellant and

the respondent arising from a sub-contract between them for the provision by the appellant of electrical

services.

The appellant's notice of dispute had claimed more than $1,000,000. The arbitrator decided

to determine four “preliminary points”, among them a contention that an accord and satisfaction

precluded the appellant from maintaining its claims.

The compromise upon which the respondent then relied to defeat the appellant's claims contained a promise by the respondent to pay the appellant $68,921 “in full and final settlement” of all the appellant's claims and entitlements under the sub-contract. The pleading also alleged that the money

had been paid on or about 11 May 1990.

Consistently with that straightforward case of accord and satisfaction, the arbitrator was invited

to consider whether:

“(a)	... an agreement was made orally on 1 May 1990 at the offices of the Respondent by J Eacersall on behalf of the Respondent and B Lawson on behalf of the Claimant.
(b)	... it was an express term of the said agreement that the Respondent would pay and the Claimant would accept ... a final payment of $68,921.00 in full and final settlement of all claims and entitlements of the Claimant under the Subcontract, or arising out of or in relation to the Subcontract Works.
(c)	... in performance of the said agreement, the Respondent made payment to the Claimant on or about 11 May 1990 in the sum of $68,921.00.”

The hearing of the preliminary points occupied 13 days between September and December

1991. In that time, two material events occurred. First, the arbitrator, an engineer, assured the

advocates, who were also engineers, that he would afford the parties an opportunity to challenge or,

as he said on one occasion, of “debunking” his provisional findings before finally determining the

preliminary points. Secondly, the respondent amended its defence to raise a different case of accord

and satisfaction.

On its amended case, the respondent was obliged to pay, and the appellant bound to accept

in satisfaction of the appellant's claims arising from the sub-contract, not only the $68,921 but also “such

amounts as might be approved” by the principal in respect of three identified “variation numbers” with

agreed values of $45, $4,551 and $265. Other amendments to the defence alleged that two further

promises by the respondent were terms of the compromise: to seek the principal's approval to those

variations, and to provide the appellant with “the break-up of certain back charges the quantum of which has been agreed”. Then the amended defence set up that, in performance of the compromise, the

respondent had paid the $68,921, obtained the principal's approval to the designated variations, and

had always been willing to provide the “break-up of the said back charges”. But the amended defence

did not contend that the respondent had paid for the approved variations or provided the “break-up”.

And because neither it nor any other pleading alleged any matter which might have absolved the

respondent from the burden of performing those contractual obligations, the absence of an allegation

that the respondent had paid the approved variations should have been fatal to the amended case that

an accord and satisfaction precluded the appellant's suing upon the sub-contract. It was not to be.

Perhaps not surprisingly, as the arbitrator and the advocates were not lawyers, little attention

was given to matters of form during the preliminary points hearing. The words in which the issue was

stated for determination were not recast to reflect the amended accord and satisfaction case. No less

importantly, the hearing involved the agitation of other issues concerning the compromise. The events

before the arbitrator, and his decisions, cannot be understood without an appreciation of those

questions, although they were not among the four preliminary points.

By an amended reply, the appellant denied the compromise. Mr Lawson, it was also said, had

no authority to make the agreement. Another alternative contention was that the respondent had

repudiated the compromise, the appellant asserting that by letter dated 17 September 1991 it had

“accepted that repudiation and terminated the agreement”. Failures to provide the “break-up” of

charges and to “follow up” with the principal the three variations were among the breaches of contract

alleged by the appellant to constitute the repudiation. Another part of the reply set up that, if the

respondent had obtained approval of the variations, they had not been paid. During the hearing, by both

evidence and argument, the appellant relied on its contentions that Mr Lawson lacked the requisite authority and that the respondent's failures to satisfy its obligations had resulted in the termination of the

compromise. Although non-payment of the variations had not been pleaded as a breach of the

compromise, it seems that all three of the breaches alleged by the appellant were advanced in an attempt

to establish the respondent's repudiation. The respondent met the suggestion that its omission over 17

months to perform the rest of its obligations constituted a renunciation of the compromise by alleging

that it was instead the appellant which had repudiated the accord when on 11 May 1990 its State

Manager, Mr Holley, wrote to the respondent unequivocally communicating an intention to pursue

claims under the sub-contract - a stance in plain contradiction of the compromise. The arbitrator had

therefore to assess the significance of the letter, although it too had not been mentioned in a pleading.

The contest concerning the compromise was not constrained by the pleadings or limited to the

issues stated in the preliminary point. The arbitrator was invited on both sides to decide not only whether

a compromise had been agreed but also upon its terms, whether Mr Lawson was authorized to make

it, and whether the appellants had terminated the compromise after the respondent's repudiation of it,

which involved consideration of Mr Holley's insistence that no compromise had been concluded. And

these things were to be fought out before an engineer by engineers.

In his provisional determination, the arbitrator announced that a compromise extinguished the

appellant's rights under the sub-contract on payment of only the $68,921. Adopting the language of the

stated preliminary point, he found that an oral agreement had been made on 1 May 1990 by Mr

Eacersall and Mr Lawson; that it was an express term of that agreement that the respondent would pay

$68,921 in full and final settlement of all claims and entitlements of the appellant under the sub-contract

or arising out of or in relation to the sub-contract works; and that, “in performance of the said

agreement”, the respondent paid the appellant $68,921 on or about 11 May 1990.

The reasons published with this “interim award”, as the arbitrator characterized his provisional

views, reveal however that he was persuaded that the compromise included the other promises by the

respondent: to pay the amount of any approved variations as well as to provide details of the

“breakdown of charges”. He spoke of the “basis” of the compromise as involving payment of the

$68,921 “subject to (a) ... the possible addition of $4861” in respect of the three nominated variations

“subject to approval by the principal” and (b) “details of ... the breakdown of charges ...”. In other

words, the substance of the provisional finding was that the respondent had to perform all four of the

promises alleged in the amended defence to secure the surrender by the appellant of its claims under

the sub-contract. This view of the compromise was not consistent with either version of the respondent's

case. Nor did it accord with the way in which the arbitrator had expressed his conclusions on the

preliminary point. The appellant's repudiation case was disposed of briefly. Having concluded that Mr

Holley's letter constituted a repudiation, the arbitrator said: “In the circumstances the Respondent did

not proceed with the remaining actions he (sic) agreed to take. I find that it was justified in that decision,

given” Mr Holley's letter.

There was no suggestion that the respondent had elected to terminate the compromise in

consequence of Mr Holley's letter. So, on the arbitrator's provisional views of the obligations the

respondent had assumed, the compromise remained partly executory: the respondent was still bound

to pay the amount of the approved variations and to provide the “break-down” of the charges; the

appellant was required to accept that performance in exchange for its rights under the sub-contract.

However, by adopting the words of the preliminary point in answering it, the arbitrator's conclusions

were not wholly reconcilable with his reasons.

When in 1996 the arbitrator entertained submissions about his “interim award”, the parties

were represented by senior counsel. For the appellant, there were extensive written and oral

submissions challenging the provisional conclusions. One criticism concerned the finding that a

compromise had been agreed: it was, in essence, that an analysis of the communications between Mr

Eacersall and Mr Lawson, assessed in the light of the surrounding circumstances, indicated that the

negotiations had not resulted in a concluded agreement. Another mentioned the inconsistency between

the determination that payment of the $68,921 had effected a surrender of the appellant's rights under

the sub-contract and both the respondent's amended defence and the arbitrator's findings. Thirdly, it

was said that any compromise had been repudiated by the respondent's failure to perform its obligations

other than paying the $68,921, which resulted in the appellant's 17 September 1991 letter terminating

the compromise. The submissions also addressed the respondent's proposition that Mr Holley's letter

constituted a repudiation.

The respondent asked the arbitrator to confirm the interim award. Boldly it was argued that the

appellant had agreed to forbear to sue in exchange either for payment of the $68,921 or for the

respondent's promises to do things including that payment; on either basis, the appellant was bound by

the compromise, although left to claim damages for any breach that might be constituted by the

respondent's non-performance of its other obligations. This approach had the attraction of simplicity,

but it was a perilous course. Among the obstacles besetting it were the inconsistencies between the

arbitrator's conclusion and both the provisional findings and the amended defence. The pleading point

may not have mattered. After all, until then both sides had asked the arbitrator to decide the real matters

in controversy without regard to form. But the disconformity between the “interim award” and the

reasons was fundamental. Of course, if the arbitrator could be persuaded to accept, as the original defence had alleged, that by paying the $68,921 the respondent had done all that the compromise

required of it to obtain a surrender of the appellant's rights to enforce the sub-contract, important

consequences followed: in particular, the mutual recriminations about repudiation would then become

irrelevant. However, acceptance of this submission required the arbitrator to change his mind. The

“basis” of the understanding he had found, and that his reasons canvassed the repudiation points,

revealed that he had taken a different view of the compromise. And if the arbitrator adhered to his

provisional findings, he could not just reiterate the “interim award”.

The award was published in March 1996. It confirmed the “decisions made in regard to accord

and satisfaction ... included in the interim award”. The accompanying reasons, however, showed that

the arbitrator had adhered to his views of the nature of the compromise. Having reviewed the

circumstances in which Mr Lawson and Mr Eacersall came to meet on 1 May 1990, the arbitrator said:

“After considerable discussion it was understood that both Mr Eacersall and Mr
Lawson had agreed on the following matters.

1.         Civil & Civic would issue a certificate of Payment of $94705 less $25784 resulting in a final payment of $68921.

2.         Civil & Civic would seek approval from the Principal for three variations Nos 35, 36 & 43, the value of which was assessed as $4861.

3.         Mr Eacersall would supply Mr Lawson with details of back charges describing the breakdown of these charges totalling $15707.23.

Evidence supports the fact that Both Mr Eacersall and Mr Lawson understood that the above matters were the basis for the finalisation of the sub-Contract.”

The arbitrator recorded that Mr Eacersall had “set about” seeking approval of the variations

and commenced preparation of the “breakdown” of the back charges. He mentions that the $68,921

was paid “about 11 May” before referring to Mr Holley's letter. This letter, which had not been received

when the money was paid, asserted that the $68,921 would be accepted “on account only” and predicted that claims arising out of the sub-contract would be submitted within 21 days. On 17 May,

Mr Eacersall, thinking that Mr Holley's letter constituted a breach of the compromise, “discontinued

progress with the other two matters which had been agreed on 1 May 1990”. On 29 May Mr Lawson

wrote acknowledging receipt of the $68,921 on “the basis of ” Mr Holley's letter.

Consistently with the notion that payment of the $68,921 was not enough to secure a

forbearance of the appellant's right to sue to enforce the sub-contract, the arbitrator next discussed the

respondent's non-performance of the rest of its promises. He rejected the contention that the respondent

had repudiated the compromise by not paying the variations (which the principal had approved on 25

June 1990) or by not delivering details of the back charges. The determining factor in this assessment

of the importance of those omissions was Mr Holley's letter, which in the arbitrator's opinion constituted

a repudiation by the appellant.

The arbitrator had in effect found that (i) a compromise was concluded between the

representatives of the parties on 1 May 1990; (ii) the respondent had partly performed its obligations

by paying the $68,921 and by seeking approval to the three variations and by setting about providing

details of the back charges; (iii) the appellant had repudiated the compromise by its 11 May 1990 letter;

and (iv) the respondent's omission to perform its remaining obligations by 17 September 1991 did not

amount to a repudiation. As it was common ground that the respondent had not elected to rescind the

compromise, the findings disposed in a practical sense of the issues presented for determination.

Although, as the respondent was content to accept, the appellant could still sue on the sub-contract

pending the tendering of performance of the respondent's outstanding promises, that entitlement was of

no real value; for recoverable claims under the sub-contract were met dollar for dollar by the

respondent's damages for breach of the compromise. Unfortunately, however, the arbitrator had not been asked to restate the points for determination to accord with the issues actually posed for decision.

In the result, his award did not pronounce on all issues raised, and the decisive findings were not

consistent with the words of the award.

The appellant sought the arbitrator's removal and to set aside the award. On that application,

the primary judge ordered that the award be varied:

“(i)	By setting aside his confirmation of subparagraph (b) ... and substituting in lieu thereof the following:
‘(b) That it was an express term of the said agreement that the Respondent would pay and the claimant would accept the sum of $94,705 less credits of $25,784 being a final payment of $68,921 together with such amounts as might be approved in respect of variation numbers 35, 36 and 43 and that the Respondent would provide to the claimant details of back charges describing the breakdown of certain back charges totalling $15,707.23 in full and final settlement of all claims and entitlements of the claimant under the subcontract, or arising out of or in relation to the subcontract works.’
(iii)	By inserting the word ‘part’ in sub-paragraph (c) ... between the words, ‘In’ and ‘performance’.”

Appeal is brought from that order.

The appeal raises several issues. The amendments are said not to be permitted by s.31 of the

Arbitration Act 1973 because they go beyond matters of form and affect the merits of the controversy.

Criticisms are made of the refusal to set aside the award and remove the arbitrator for “misconduct”:

the arbitrator's reasons are said to be inadequate as well as to evince a denial of natural justice, and to

disclose errors of law in holding that there ever was an enforceable accord and satisfaction. More

particularly, the complaints are of failures to give proper reasons for finding that an agreement existed

or as to its terms, for an “implied finding” of satisfaction as well as an accord, and for rejecting the

appellant's arguments.

In assessing the adequacy of the reasons, on the appellant's case those accompanying the

“interim award” must be ignored. The earlier, so the argument runs, were not incorporated, expressly

or impliedly, into the final reasons. As it happens, it is not necessary to decide this point. The final

reasons suffice. However, as the problem assumed importance in the appeal, it is as well to discuss it.

The final reasons do not say that they are intended to supplement, rather than supplant, the

earlier. There is the ambiguous utterance near the end that “the decisions made in regard to Accord and

Satisfaction ... and which were included in the Interim Award should be confirmed ...”. Although not

explicit, the final reasons look to indicate that the arbitrator intended them to complement the earlier.

The arbitrator, it seems, regarded the new as essentially a response to the way in which the two cases

had been developed by the lawyers. He records his “very careful consideration” of the submissions of

senior counsel for the appellant. He recites arguments concerning the terms of any compromise and the

significance which, on the appellant's case, attached to the respondent's omission to perform all its

obligations. In this context, it is pointed out that Mr Eacersall, until he received Mr Holley's letter, had

“proceeded to carry the matters” agreed to. Then he explains why in his view the appellant, not the

respondent, had repudiated the compromise. There is, it is true, a measure of repetition. Both sets of

reasons contain findings about the context and content of the 1 May 1990 meeting, as to the terms of

the compromise, about Mr Lawson's authority, and in relation to the rival repudiation cases. The earlier

reasons, however, exclusively deal with at least one matter that is basic to the eventual conclusions -

impressions of the reliability of Mr Eacersall and Mr Lawson, the arbitrator preferring the former's

testimony as “corroborated by other witnesses and by exhibits ... (and) reliable” to that of the “evasive”

Mr Lawson whose evidence was “in many instances contrary to ... fact”.

Even if the arbitrator's reconsideration has led him to a slightly different conclusion on some

issue, viewed against the background of the course of proceedings, the final reasons appear to manifest

an intention by the arbitrator to adopt the earlier. It should be taken that, except to the extent of any

inconsistency - and no conflict was suggested - they complement the reasons accompanying the “interim

award”.

Mention has already been made of the arguments presented in 1996. Although in forming a

view about the inadequacy of the reasons, those which accompanied the interim award may be

considered, the final reasons addressed the substance of the appellant's contentions and sufficiently

explained the fundamental conclusions. They are adequate for the functions the arbitrator had to

discharge: cf Cypressvale Pty Ltd v Retail Shop Lease Tribunal [1996] 2 Qd R 462, 485, 489, 492.

The reasons describe the background of the 1 May 1990 meeting, that its purpose was to agree on the

final value of the sub-contract, and that the attending representatives had the authority needed to make

pertinent decisions. The arbitrator set out his findings about the nature of the compromise before

discussing the steps which Mr Eacersall took to perform the respondent's obligations. Also touched

upon were Mr Holley's letter and its significance as a repudiation, Mr Eacersall's reaction to it, and Mr

Lawson's 29 May letter. To that point his reasons were intelligible, germane, and sufficed to acquaint

the parties with the bases of the essential findings of fact and conclusions of law. The arbitrator did not

analyze every little point, but he was not obliged to do so. A later section of the reasons, however, has

occasioned a concern - unjustified in fact - that the arbitrator has impliedly found that the appellant has

forfeited its rights to performance of the respondent's outstanding obligations.

There was no suggestion, by a pleading or otherwise, that time was ever of the essence of the respondent's obligations under the compromise. That aside, the history of the arbitration had a potential to bear upon the significance of the respondent's not having performed its remaining obligations by 17

September 1991. Mr Holley's 11 May 1990 intransigent letter was soon followed by steps calculated

to lead to a determination of the parties' rights under the compromise. The appellant gave notice of

dispute in early July 1990. Within a month the arbitrator had convened a “preliminary meeting”. Several

steps took place afterwards culminating in the preliminary points hearing that began on 9 September

1991. In the circumstances, the arbitrator was entitled to conclude that the respondent's procrastination

did not evince a repudiation of the compromise by 17 September 1991. In dealing with that issue,

however, the arbitrator, expressed himself in this way:

“The question of which party was responsible for the repudiation of the verbal agreement, which I believe was entered into on 1 May 1990, depends, in my opinion, on which party first repudiated the agreement.

In the case of Shevill & Ors v Builders Licensing Board (1981-1982) 149 CLR page 620, the High Court says:-

‘If a contract is repudiated by one contracting party, then the other innocent party can elect to either ignore the repudiation and affirm the contract or accept the repudiation and thus being the contract to an end.’

In this case the evidence tended (sic) to me was that the Respondent intended to fulfil its promises and it was the Claimant who resiled from the agreement.”

Where both sides contend that conduct of the other constitutes repudiation of a contract, to

ascertain the rights of the parties, it is usually a mistake simply to ask who repudiated first. Subject to

the qualification discussed in Foran & Anor v Wight & Anor (1989) 168 CLR 385, 395-396, 421-

422, 442, 459, “a party who elects not to accept the repudiation of a contract remains bound by the

terms of the contract to perform the obligations which it imposes” (Dawson J at 442), and the party

initially in breach “may take advantage of any supervening circumstance which justifies him in refusing

to perform ...” (Brennan J at 417) as, for example, a breach by the other party which justifies rescission. For this reason, Mr Holley's letter could not of itself deny the possibility of a subsequent repudiation by

the respondent which, as was common ground, had not elected to rescind. It must be remembered,

however, that the respondent had not claimed to have been permanently absolved from satisfying those

obligations the performance of which was to bind the appellant not to enforce the sub-contract. Its case

on repudiation was that it had not elected to, and the appellant was not entitled to, terminate the

compromise. Inelegantly, the arbitrator was really saying that the appellant had, but the respondent had

not, repudiated. Understood as a response to the arguments advanced, the passage does not disclose

an error of law.

There remain the important conflicts between the terms of the “award” and both the findings

and the amended defence and the error of law they evidence. They are relied on for more than one

purpose: to establish error of law on the face of the award as well as the inadequacy of the reasons; and

to justify the arbitrator's removal on the ground that he is, in a word, incompetent.

The confirmation of the “interim award” cannot have been designed to generate inconsistency

between the arbitrator's determination and the findings which were supposed to support it. The

disconformity can only sensibly be explained on other grounds. It might result from inadvertence, or it

could evidence the arbitrator's failure to understand the appellant's submissions about the incongruities.

The appellant contends for the latter explanation, pointing out that prominence was given to the problem

in 1996, though no mention is made of it in the reasons. The conflict between determination and reasons

is therefore said to indicate that the appellant's contentions were neither addressed nor comprehended

by the arbitrator and, accordingly, illustrates his unsuitability to decide the contest.

Until lawyers replaced engineers as the advocates, with the encouragement of the parties' representatives, the arbitration was conducted without attention to matters of form. Even the respondent's senior counsel urged the arbitrator to ignore differences between the defence and the facts

and to confirm the “interim award”. The appellant, however, had clearly raised the inconsistencies. Does

the arbitrator's failure to acknowledge the incontestable force of the appellant's case on this point

demonstrate his unsuitability?

The arbitrator's suitability is to be assessed by reference to his conduct and competence as they

emerge from his decisions, the reasons for them, and the proceedings generally. His mistake in creating

an important disconformity between award and reasons is unfortunate, especially given the attention the

matter received in the 1996 hearings. All things considered, however, that the arbitrator appears not to

have grasped the argument about the form of the stated preliminary point is not a satisfactory basis for

concluding that he should be removed, or that the award should be set aside, for demonstrated

incapacity. The most important consideration in reaching this conclusion is that, in general, his reasons

suggest that the fair determination of this arbitration according to law is not beyond him, even though

the arbitrator has not attached enough importance to form.

The challenges founded on complaints of inadequacy of reasons, denial of natural justice, and

about the arbitrator's unsuitability fail.

The determination deserves correction so that it accords with the terms of the compromise. If,

as the parties are content to accept, the final determination is an award, s.31(c) of the Act authorized

alterations to it to bring it into conformity with the reasons; for such a change does not affect the merits

of the controversy. Corrections of the kind ordered by the primary judge were appropriate. But such

changes will still leave things in an unsatisfactory state. The preliminary determination does not dispose

of all the issues presented for decision: as an example, the determination is silent on the appellant's contention that it terminated the compromise for the respondent's repudiation in September 1991. Nor

does it dispose of the reference.

The matter should be remitted to the arbitrator. He should determine all the preliminary points

submitted for his decision. He might then be expected to make his award upon the entire reference -

a step that may well be more than formal: for example, the respondent, if in the meantime it has tendered

complete performance of its obligations, might seek to demonstrate that it has become entitled to an

award that the appellant recover nothing for its claims. The order for remitter should accommodate the

prospect that the due finalisation of the arbitration, consistently with findings already made, could involve

more than a change to the wording of the determination on the preliminary point.

Mention has not so far been made of the arbitrator's decisions on other preliminary points. One

merits consideration.

As an alternative to its accord and satisfaction case, the respondent set up that an estoppel

precluded claims by the applicants under the sub-contract. The facts pleaded in support of the estoppel

contention revolve around the meeting between Mr Eacersall and Mr Lawson on 1 May 1990 and have

much in common with the compromise; so much so that, as the appellant submitted, if there was an

agreement, there is no scope for the operation of the alleged estoppel. The primary judge noted that

both sides accepted that the estoppel issue was irrelevant, at least unless the arbitrator was not entitled

to find that the compromise had been concluded. In the circumstances, it is not necessary to say more

about it.

An opportunity should be afforded for submissions with respect to the orders appropriate to

the disposition of the appeal.